Foreclosure settlement cash a few months away

Nearly 4 million homeowners will be contacted within the next three months to receive payment under Monday's $8.5 billion foreclosure-abuse settlement between federal regulators and 10 large banks, according to the Federal Reserve.

Eligible borrowers, including homeowners in the foreclosure process during 2009 or 2010, will not be required to prove wrongdoing with their mortgage or take any further action, Barbara Hagenbaugh, a spokeswoman for the Federal Reserve, said Tuesday. Eligible homeowners will receive payment even if they did not previously apply for a foreclosure review.

Under the settlement agreement, which ended a nationwide foreclosure review program, the banks will pay as much as $3.3 billion directly to 3.8 million affected borrowers. The deal also designates $5.2 billion for loan modifications and other assistance to borrowers.

Hagenbaugh said each homeowner will receive between a few hundred dollars and $125,000; the specific amount will be determined by the type of problem with the mortgage, such as being denied a loan modification or having a home improperly seized. Every borrower in a particular category will receive the same amount, regardless of the size of the mortgage.

The distributions will be overseen by a yet-to-be-determined third-party firm that will be appointed jointly by the 10 banks – including JPMorgan Chase & Co. and Wells Fargo & Co. – and overseen by regulators. The payment administrator is expected to contact homeowners by the end of March with payment details.

Some consumer advocates have criticized administrators of the Independent Foreclosure Review program in the past for poor communication.

When regulators established the program in 2011, administrators sent more than 4 million letters to potentially eligible borrowers and encouraged them to apply. But the first round of letters was written primarily in English, which made the information inaccessible to some foreign language-speaking borrowers. Many homeowners also overlooked letters because they did not look official, said Pat Pinto, manager of the foreclosure mitigation unit of the Legal Aid Society in Santa Ana.

"It did not look like it came from a government agency," she said. "A lot of homeowners who got this thought it was another scam and just threw it away."

It has not yet been determined how borrowers will be contacted, but Pinto said she hopes administrators can figure out how to distribute payments to those who have relocated. "I don't know how they're going to reach homeowners," she said.

John Miller still is hoping to hang on to his one-story Mission Viejo home after eight failed attempts to get a permanent loan modification. The settlement may provide just the salvation he needs.

"That would be great. Anything, I would thank God for," said Miller, 46, whose income as a land surveyor dropped as homebuilders curtailed their activity over the past four years.

Miller paid $723,500 for his three-bedroom house in July 2006, taking out $651,000 in loans to buy the property. Today, he estimates the house is worth about $440,000.

He said he was unable to make the $3,107-a-month payment of his main loan after suffering from the triple hardship of divorce, unemployment and disability in the past six years, and eventually stopped making payments to prod his lender, Wells Fargo, into a loan modification. His home was scheduled for foreclosure Friday, but the sale was postponed for at least a month at the lender's request.

"I'm just trying to get to a point of stasis where I cannot only afford to live here, but the payments would stay the same," Miller said. "I have absolutely no idea (if the settlement will assist), but I'm hopeful for every turn that will help me."

After Monday's announcement, Promontory Financial Group, which had been reviewing foreclosures for Wells Fargo and other banks, laid off hundreds of temporary employees working at an office in Orange. The Wall Street Journal reported that several hundred more Promontory workers – many of them attorneys – were laid off in Denver, and an employee post on Twitter mentioned that about 40 workers were laid off in Atlanta.